Will Trump’s Liberation Day Tariffs Trigger A Bitcoin Bear Market? 

Trump’s 10% universal tariffs saw the crypto market lose 5% overnight, as the market cap fell below $3trillion. Are there more losses ahead?

On 2 April 2025, President Donald Trump announced a series of tariffs under the initiative termed “Liberation Day”. This policy introduces a universal 10% tariff on all imports into the United States, effective 5 April 2025. Additionally, higher “reciprocal” tariffs are imposed on specific countries based on their trade practices, set to commence on 9 April 2025.

Following the announcement, Bitcoin and other major altcoins pulled back from their earlier recovery. Bitcoin recovered to $88,000 this week before declining to approximately $83,000 after the Liberation Day tariffs. Meanwhile, ETH was showing signs of recovery towards $2,000 but fell to $1700.

So, how will these tariffs impact the broader market in the short term? Are we about to see a bear run?

Crypto is caught in a global trade war

Analysts have drawn parallels between the current tariff measures and historical events, such as the Smoot-Hawley Tariff Act of 1930, which exacerbated the Great Depression through retaliatory trade wars. There is apprehension that the new tariffs could lead to similar economic challenges, potentially impacting the cryptocurrency market further.

Some analysts express concern that the tariffs could lead to stagflation — a combination of stagnant economic growth and high inflation — which may negatively affect both traditional and crypto markets.

Conversely, others suggest that in the long term, Bitcoin’s decentralized nature might attract investors seeking alternatives to traditional assets amid escalating trade tensions.

Here’s how Bitcoin and the overall crypto market could shape up in Q2:

• Increased market volatility: The imposition of broad tariffs may exacerbate existing market uncertainties, leading to heightened volatility in the cryptocurrency sector. Investors often react to geopolitical developments, and the current trade tensions could result in unpredictable price movements for digital assets.
• Correlation with traditional markets: Cryptocurrencies have shown a growing correlation with traditional financial markets. As tariffs impact global trade and economic growth, any downturn in equities may be mirrored in the crypto market, potentially applying downward pressure on Bitcoin’s price.
• Inflationary pressures: Tariffs can contribute to increased costs for imported goods, potentially leading to higher inflation. While some investors view Bitcoin as a hedge against inflation, the overall economic impact of rising prices could influence investor behavior and market dynamics in complex ways.
• Regulatory developments: The current administration’s stance on cryptocurrencies, including potential regulatory changes, could further influence market sentiment. Any moves toward deregulation or increased oversight will likely have significant implications for the crypto market.

Final thoughts

Overall, the “Liberation Day” tariffs are poised to introduce substantial uncertainty into the financial space. While the immediate reaction in the cryptocurrency market has been negative, the long-term impact on Bitcoin and other digital assets will depend on various factors, including the duration of the trade tensions, subsequent economic policies, and broader market responses.

Investors should remain vigilant, monitor ongoing developments, and consider diversifying their portfolios to mitigate potential risks associated with these geopolitical shifts.